Of 158 million workers in the U.S. in 2007, only 52% (81.9 million) worked for an employer or union that sponsored a pension or retirement plan. Overall, just 41.5% of workers – 65.6 million people – were covered by those plans.

The number one reason workers do not have a pension or retirement plan is that their employer does not offer one. Even workers whose employer offers a plan may not participate because they are ineligible or elect not to participate. Despite the fact that there are numerous routes available for both employers and employees to set up retirement accounts, most small and medium sized business owners and managers have not set up retirement plans for their workers and most individual workers are not regularly contributing to retirement accounts.

The result is that the majority of workers are not regularly saving for retirement. While some workers may have one or more accounts that were set up at one time or another, most accounts are quite small, and workers are not making regular contributions to them.

Low-income workers – 83% of workers with annual incomes of less than $20,000 lack pension or retirement plan coverage.

Part-time and temporary workers – 75% of workers who work part-time or part of the year do not have a pension or retirement plan.

Small business employees – 80% of workers employed by businesses with fewer than 25 employees do not have a pension or retirement plan.

Recently created retirement plan choices have not improved coverage, either. Over the past 30 years, the 401(k), so named for the tax code provision that enables these plans, has become the preferred option for large companies. Other plans were designed to provide low-cost options for small businesses beyond the 401k and traditional defined benefit pensions, including Payroll Deduction Individual Retirement Accounts (IRAs), Simplified Employee Pensions and S.I.M.P.L.E. IRAs.

But instead of extending coverage to a greater share of the workforce, these new “defined contribution” options have simply replaced more efficient “defined benefit” pensions. The percentage of private sector employees working for employers that offer a pension or retirement plan has remained between 50-60%, ranging from a high-water mark of 59% in 2000, to a low point of 50.7% in 1987 – just below the 2007 rate of 52.7%. Employee participation rates were 39.8% in 1987 and only 42% in 2007.

There are two main reasons why business owners and their employees are not setting up and contributing to retirement accounts:

The complexity of retirement investment options

High costs and hidden fees for start-up, administration and participation

There are ways around those complexities and costs – but let’s take a closer look at them first.

Next: Why small businesses and workers can’t get into the market for a retirement plan